US government to sell off $13B of mortgage bonds from failed banks Signature and SVB

The U.S. government is seeking to sell $13 billion worth of mortgage bonds amassed after the failures of both Silicon Valley Bank (SVB) and Signature Bank earlier this year.

First reported this week by Bloomberg News, the bonds in question are part of $114 billion in assets the Federal Deposit Insurance Corporation (FDIC) recovered when it assumed control over both banks earlier in the year.

The bonds are secured by “long-term, low-rate” loans made primarily to developers of low-income multifamily apartment complexes.

To aid the impending sales, the FDIC has reportedly considered alternatives to cutting bond prices up to and including repackaging the associated debt into new securities, Bloomberg reported. BlackRock Financial Market Advisory had preliminary conversations with investors about the bonds, the report said, citing unnamed sources.

In April, the FDIC decided to sell a portfolio of $114 billion in MBS it obtained after seizing control of the banks, retaining Blackrock to conduct the sale. In March, First Citizens Bank & Trust Company announced its intent to acquire all of SVB’s deposits and loans that were moved to an FDIC-created bridge bank after the collapse.